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Why the Failure to Plan for Your Long Term Care Can Have Devastating Consequences

The RAND Corporation estimates in a recent study that the monetary cost of dementia in the United States ranges from $150 billion to $215 billion annually. According to their findings, the cost of dementia to the nation is greater than that of heart disease or cancer. Further, dementia care costs are expected to double by 2040.

As the number of individuals requiring long term care continues to grow, one of the first things that will be tested is whether our existing system can adequately handle the surge. Traditionally, most individuals suffering from advanced dementia and/or other Alzheimer’s and Parkinson’s related illnesses were treated in nursing homes. However, over the last decade there has been a significant shift from this model of care to one with greater emphasis upon “aging in place.” Today, more and more of these individuals are receiving care either at home, in an assisted living facility, or in a continuing care retirement community for significantly longer periods of time.

Regardless of the housing option chosen, the need will still exist for significantly larger numbers of trained health care providers to attend to a growing aging population that is living longer. This means more physicians trained in geriatric medicine, qualified home care providers and aides, assisted living facilities, and even nursing homes within the next 20-30 years.

For seniors not financially eligible for Medicaid and who have not purchased long term care insurance or engaged in long term planning, the cost of such care can be devastating. For example, in Westchester County the average private cost of 24/7 care at home can average between $7,000 to $10,000 per month when utilizing a qualified agency. Obviously, this is significantly less expensive than the cost of a nursing home, which in Westchester averages $140,525 to $155,125 per year.

Fortunately there are a number of planning options available to seniors which will allow them to shelter their assets from the cost of care, such as gifting of assets, utilizing an Irrevocable Medicaid Asset Protection Trust, and/or purchasing long term care insurance. Implementing these options prior to needing care, however, is imperative.

If one is financially and categorically eligible, the federal/state program providing care for seniors either at home or in a nursing home is Medicaid (not Medicare). Medicaid is a “means tested” entitlement program that looks at both the resources (savings) and income of the senior to determine eligibility. For example, if a senior is single, he or she is not allowed to have more than $14,400 of savings and no more than $800 or $820 per month of income to be eligible for either nursing home or home care Medicaid. However, spouses are permitted to transfer assets to each other to help meet the financial eligibility requirement. The spouse to whom the assets have been transferred may need to execute a “spousal refusal” stating that he or she refuses to utilize his or her income and resources to support his or her spouse.

While novel ideas are proposed from time to time to limit financial exposure, in reality seniors have only two truly effective advance planning options – purchase long term care insurance and/or transfer a portion of their assets to an Irrevocable Medicaid Asset Protection Trust or to their loved ones. The transfer of assets to a Trust will create a five-year look back period (ineligibility period) for purposes of Medicaid nursing home eligibility (not Medicaid Home Care). However, once the five years have elapsed the assets transferred will not be counted as available resources.

Advanced planning is imperative for seniors who wish to shelter their life savings from the cost of long term care. The RAND Corporation’s recent findings remind us that such steps are more critical now than ever before.

1 Comment

You plan to fail if you fail to plan as the saying goes. I agree with the important points discussed by the author, planning for long-term care insurance is your best course of action to avoid future devastation with your finances and relation with families, friends and relative. Infolongtermcare.org notes that the need for ltc services can drain even an ample amount of lifetime savings. Though there may be government programs that help pay for long-term care expenses, you must be able to meet their eligibility requirement and you do not get the care and settings you prefer.

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